October 15th, 2010
Wall Street Journal
The unfolding foreclosure-processing debacle is causing bank stocks to slide and putting millions of delinquent borrowers in limbo.
But how disruptive the crisis ultimately becomes—for homeowners, the housing market and the broader economy—depends on how quickly a number of technical problems and legal challenges are resolved in the months ahead.
n essence, fast-paced modern finance is colliding with the much slower machinery of the U.S. legal system. While finance aims for efficiency and maximized profits, the courts demand due process. And that's becoming a growing issue as lenders come under attack for taking short cuts to oust homeowners who haven't mailed in a mortgage check for months.
Banks stocks were hammered on Friday for the second straight day as investors continued gauging the sector's exposure to higher operating and legal costs.
Bank of America Corp. shares lost nearly 5%. Shares of Wells Fargo & Co. also fell nearly 5%, while J.P. Morgan Chase & Co. fell 4% and Citigroup Inc. lost nearly 3%. And the cost of protecting against the default of bank bonds continued to surge.
BofA and J.P. Morgan said they temporarily suspended foreclosure sales as they review procedures, while other big banks have said they are reviewing files but haven't promised to freeze foreclosures. But even here, bankers are having trouble slamming on the brakes.
Banks still are referring some loans to foreclosure in states where they issued suspensions, despite the moratoria. This week in Illinois, Florida and Ohio, Bank of America and J.P. Morgan Chase continued proceedings that allow them to sell foreclosed homes at public auction, according to court clerks.
A J.P. Morgan spokesman said Friday that "we have asked our local foreclosure attorneys not to seek judgments." Bank of America said on Oct. 8 that it would "stop foreclosure sales until our assessment has been satisfactorily completed." On Friday, a bank spokesman said that its cancellations only cover foreclosure sales scheduled between Oct. 9 and Oct. 31 because it doesn't expect the review to take longer. BofA's moratorium includes all 50 states, while J.P. Morgan's covers 41 states.
The financial system and legal system have been on a collision course for some time in residential real estate. Both the lower standards for loans and the lax controls involving foreclosures were based on the premise that home prices would never fall, making it unlikely that many loans would go bad at once. Once that premise fell apart, the flaws in the system became obvious, and the long-term challenge now facing lenders is to rebuild the mortgage system on more solid footing.
Banks argue that these problems will be repaired swiftly, and they'll soon be running the foreclosure machinery at full speed again. But analysts say the problems could expand into a legal crisis if banks can't prove that they are following standard property-law procedures.
Lawyers, politicians and consumer advocates, meanwhile, are using the legal problems to stop foreclosures and extract settlements for troubled borrowers that lower their mortgage debt.
Industry executives note that few, if any, borrowers in the foreclosure process dispute the fact that they're not paying their mortgages. "We're not evicting people who deserve to stay in their house," James Dimon, J.P. Morgan chief executive, told analysts Wednesday.
But the banks' "reassurance is not reassuring," says Susan Wachter, a professor of real estate at the University of Pennsylvania's Wharton School, because it doesn't deal with how easily they can prove ownership of the underlying mortgages.
The legal drama partly represents the clash between a financial sector that developed electronic processing to speed up procedures versus the U.S. property-law system, which relies on physical paperwork filed by individuals.
There are two different problems. The first resulted after lawyers for troubled borrowers discovered that banks were using "robo-signers," or back-office employees who approved hundreds of foreclosure documents daily without reviewing them, in states where repossessions must be approved in court.
Banks had no choice but to suspend foreclosures in those states because submitting false witness testimony meant they hadn't properly proved ownership of the loans in foreclosure.
The second, and perhaps thornier, issue is that banks could have trouble proving they have standing to foreclose as they go back to correct errors. That problem stems largely from mortgages that were bundled into pools and sold to investors as securities. This process, known as securitization, became the preferred method of financing U.S. home loans over the past 30 years.
"This is back-office work. This is not all going to resolve itself immediately, and we're going to have to be patient," says Richard Dorfman of the Securities Industry and Financial Markets Association's securitization group.
Real-estate law requires the physical transfer of paperwork whenever mortgages trade hands, and analysts are raising questions about how often that happened during the housing boom. One concern is that banks may have lost, or didn't ever have, mortgage certificates. If that happened, banks will have to pause foreclosures for months as they track down certificates and refile paperwork.
"The best case is this is going to slow the process considerably but not change the outcome," says Joshua Rosner, managing director at investment-research firm Graham Fisher & Co.
For example, in Florida, which requires banks to foreclosure through the court system, the average borrower had spent 678 days without paying before being evicted through foreclosure, according to J.P. Morgan.
Under a far gloomier scenario, the problems created by using robo-signers may be irrelevant if, instead of being lost, mortgage documents weren't ever properly transferred during each step of the securitization process, says Adam Levitin, a professor of law at Georgetown University. If that happens, "the whole system comes to a halt," he says. Investors could argue in court that they never owned the mortgages backing their money-losing securities.
Banks and their attorneys say such fears are overblown. Procedures for transferring loans into mortgage-backed securities "are sound and based on a well-established body of law governing a multi-trillion dollar secondary mortgage market," said Tom Deutsch, the executive director of the American Securitization Forum, in a statement Friday.
For now, the foreclosure machinery operates in fits and starts. For instance, Bank of America said it had suspended foreclosures in Ohio while it reviews procedures there.
Still, attorneys for Bank of America moved to take back three homes through foreclosure on Oct. 12 in Franklin County, Ohio, according to a court clerk. In Summit County, Colo, J.P. Morgan on Friday took back a foreclosed condominium unit on the courthouse steps with a bid of $154,278, according to the county treasurer. A J.P. Morgan spokesman said the bank isn't suspending foreclosure sales in Colorado.
In Lee County, Florida, both J.P. Morgan Chase and Bank of America continued to pursue judgments moving homes through foreclosure, according to court records. April Charney, a Florida-based attorney with Jacksonville Legal Aid says she's been contacted by at least five attorneys across the state who represent borrowers whose homes are proceeding to sale. A J.P. Morgan Chase spokesman said "we have asked our local foreclosure attorneys not to seek judgments."
Michael Holmes, 55 years old, an antique dealer, is upset that GMAC Mortgage, a loan servicer, is going to auction his home in Belfast, Maine, next week. Mr. Holmes expected the company to suspend his foreclosure sale because the lawsuit against him included an affidavit from Jeffrey Stephan, a GMAC employee who testified to signing as many as 10,000 loan documents without reviewing them. "There's all this news everyday that foreclosures are being halted, but that's just not the case for me," he says.
GMAC had originally scheduled an auction of Mr. Holmes' Victorian-style home for Thursday of this week, but postponed the sale for seven days after Mr. Holmes' attorney, Andrea Bopp Stark, contacted the company.
A GMAC spokeswoman said Friday it won't pursue a foreclosure sale based on a "defective affidavit, and in Mr. Holmes' case "an amended affidavit was filed and accepted."
October 15th, 2010
(CNN) -- Playing cards with images of Hitler. Toy fuhrers. And a lamp and church tapestry with swastikas emblazoned across the front.
No, it's not a neo-Nazi convention. Rather, it is a groundbreaking exhibit that opened Friday in the German capital and is intended to show Adolf Hitler's relationship with the German people.
Germany has produced exhibits on the Holocaust and Nazism before but never since World War II has one focused solely on the man who taught an entire nation to hate.
"Hitler and the Germans" is not about the fascist dictator's memorabilia, not about the man himself, said curator Hans-Ulrech Thamer. It's not about textbook history or scholarly writings.
The everyday objects on display show how Hitler won the heart of the German people.
Everyone can read a book, but "objects have another quality," Thamer said.
There are rows and rows of magazine covers carrying the face of Hitler as well as enormous metal busts carved for industrial mantle pieces. And propaganda signs, welfare collection boxes, photographs, film footage promoting a visionary leader of the fatherland.
Thamer hopes viewers -- many of whom are sure to be Germans who no longer have direct memories of their nation's ugly history -- will look inside themselves as they cast their eyes on ordinary things that back then, served a very extraordinary purpose.
Michael Salberg of the Jewish civil rights group the Anti-Defamation League, called the exhibit "extraordinary."
"It's the ordinary objects -- that is what makes it powerful," he said.
They are disquieting, upsetting, even off-putting, he said. Viewers might even go home and turn on a lamp in their living rooms and think about how the objects in the exhibit once occupied the same kinds of places.
"It wasn't just among a group of elites," said said Salberg, director of international affairs at the ADL. "That German society was permeated with the symbols and the images that the regime was promoting was an important first step, and it took hold in a very frightening way."
More than 1,000 people streamed into the museum on opening day, Thamer said. They walked through halls devoted to three chronologically and thematically arranged chapters showing the circumstances of Hitler's rise and rule.
Swastikas are banned in Germany but Thamer said museums have special permission to display them for historical purposes. Still, organizers of the show agonized over possible repercussions: inciting neo-Nazi extremists and infuriating the rest of the world.
A new study published this week in the German magazine Der Spiegel revealed far-right thoughts are common in Germany today. One-third of Germans said they would send foreigners home if there were not enough jobs to go around. One-sixth of Germans said Jews have too much influence.
"Yes, we have had some objections," Thamer said. "One of the fears discussed in the newspapers is that this might promote extreme groups. But I am not sure they enter museums."
Salberg said he did not believe an exhibit was likely to accelerate or motivate extreme viewpoints.
"People who have a xenophobic view of their society are not going to be any less or more xenophobic because of this exhibit," Salberg said.
Deborah Lipstadt, a scholar of the Holocaust, also felt such exhibits are important.
"You understand that these things did not come out of nothing," said Lipstadt, who teaches at Emory University in Atlanta, Georgia. "There was a method to the madness."
She found powerful a similar exhibition of the power of Nazi propaganda at the United States Holocaust Memorial Museum in Washington.
Some 55 million people died in World War II, including 6 million Jews who perished in the Nazi-orchestrated Holocaust.
October 15th, 2010
STOWE, Vt. — Strong winds, heavy rain and even snow moved into the Northeast on Friday, with the weather expected to get worse for evening commutes and overnight.
By late Friday morning, flights into La Guardia and Newark airports were being delayed by more than an hour due to the wind and rain.
Killington, Vt., had five inches of snow Friday morning and other areas above 4,000 feet saw the white stuff as well, Jim Cantore of weather.com reported for MSNBC. By the time the storm blows through on Sunday, he added, some Vermont and New Hampshire mountains could see 16 inches of snow.
Forecasters say two low pressure systems will combine to create a strong nor'easter covering most of the northeastern half of the nation, stretching from the Atlantic to the Great Lakes.
The system will pull moisture and energy in from the Atlantic Ocean, kicking up winds up to 50 mph and rainfall ranging between 1 to 3 inches in most areas.
The winds were expected to strip many trees of their fall foliage and even down some, raising the possibility of power outages due to fallen power lines.
Some snow may develop at high elevations of the interior regions. A winter storm watch is in effect for most of Friday. Elevations above 2,000 feet are likely to see snow, or a combination of rain and snow, and will most likely be contained to northern New York and the extreme Northeast.
The Associated Press contributed to this report.
The Associated Press contributed to this report.
October 15th, 2010
Published October 15, 2010
Merchandise is shown on shelves at a Walgreens in Detroit Monday, Sept. 27, 2010. (AP)
Under the new health care law, consumers using workplace pre-tax health savings accounts will soon need a doctor's note to pay for Tylenol and an estimated 15,000 other over-the-counter drugs.
Starting Jan. 1, employees who use flexible spending accounts (FSAs), health saving accounts (HSAs), or health reimbursement arrangements (HRAs) to pay for common medications such as pain relievers, cold medicines, antacids and allergy medications will need prescriptions. The new rules don't apply to insulin.
The new rules will also prohibit the use of FSA or HRA debit cards provided by administrative plans for over-the-counter purchases, because the IRS says there's no way to prove the drugs were prescribed.
The IRS says any money removed from HSA accounts to pay for medical expenses bought without a prescription will be included as taxable income and subject to an additional tax of 20 percent.
Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the industry lobby that voiced support for the overhaul but has been accused by some of the law's proponents of trying to undermine it, said the law creates "unintended consequences."
"It creates unnecessary hassles for consumers and provides the wrong kind of incentives," Zirkelbach said, adding that the changes could make it more difficult for consumers to get medicines they need at costs they can afford.
"This change could have the unintended consequence of increasing health care costs," he said. It might provide an incentive for consumers to go back on more expensive medications when over-the-counter medicine works just fine."
More than 10 million consumers use HSAs, according to a survey done in January by AHIP. That's up from 8 million in 2009 and 6.1 million in 2008.
According to an analysis by benefits administrator Aon Hewitt of more than 220 employers covering more than 6 million workers, 20 percent of employees, or 1.2 million, contributed to an FSA in 2010. Of those workers, the average annual contribution is $1,441.
FSAs and HSAs allow workers to reduce their taxable income to pay for qualified health care or child care expenses. Anyone with a high-deductible medical insurance plan can obtain an HSA. The IRS defined a high-deductible plan in 2010 as $1,200 a year for individuals and $2,400 for families.
FSAs, which were first authorized by Congress in 1978, are only available through employers who offer the plans. But FSAs face another new rule under the Affordable Care Act -- a limit on the pre-tax contributions to $2,500, starting Jan. 1, 2013. There is currently no limit on how much an employee can contribute to FSAs, although employers can impose one.
Lawmakers imposed the cap to help pay for provisions that will expand coverage starting in 2014. The cap is expected to raise $13 billion for other government-provided health care services offered between 2013 and 2019.
October 15th, 2010
Green Beans Coffee Company got its start with, and has a unique dedication to, the troops of the United States military. Within our cafes at home and around the world, Green Beans Coffee offers the men and women of the U.S. Armed Forces the highest quality coffee and tea beverages in an inviting environment where soldiers, airmen, sailors and marines can relax and feel at home.
U.S. Army personnel at nearby Eskan Village caught word about the new coffeehouse, and soon after, invited Jason to open a cafe on the US Army base. Within months of operating at Eskan Village, the Air Force extended an invitation for a further 3 locations at the Prince Sultan Air Base, in Al-Kharj KSA.
Today, Green Beans Coffee Company serves military personnel in Afghanistan, Iraq, Kyrgyzstan, Kuwait, Qatar, Djibouti, Africa and domestically at military bases across North America. The company has not only grown in locations, but also in its mission to support our men and women in uniform.
Our twelve-year heritage of supporting those that put their lives at stake in service to our country is firmly rooted and non-negotiable. That tradition of caring is the foundation of our operating philosophy and carries over in our commitment of giving back on a national level, where a portion of every sale is donated to charities like TAPS and Soldiers Angels that strive to improve the life for disabled armed services members, military families and their children.